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Global Economy and China's Economy in 2021

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Global Economy and China's Economy in 2021 Global Economy and China’s Economy in 2021 Liqing Zhang Chief Economist of PwC China and Professor of the Central University of Finance and Economics December 2020 Global Economy and China’s Economy in 2021 Content 03 10 16 Uncertain and unbalanced global Significant risks to global finance in the Opportunities and challenges facing economy recovery post COVID-19 world China’s economy in 2021 Global Economy and China’s Economy in 2021 Uncertain and unbalanced global economy recovery Global Economy and China’s Economy in 2021 Uncertain and unbalanced global economy recovery (1) In April 2020, IMF substantially cut its IMF DataMappar Real GDP growth (Annual percent chage, 2020) growth forecasts for 2020: • Global economy would shrink by 3% in 2020 (IMF forecasted 3% growth at the beginning of the year) • Global economy would suffer from the worst recession since the “Great Depression”. • Nearly 90% of the countries recorded negative growth, the most extensive economic recession in the past 150 years. 6% or more 3%-6% 0-3% 90% -3%-0 less than -3% of the countries no data recorded negative growth Source: IMF, 2020, World Economic Outlook (April 2020) Global Economy and China’s Economy in 2021 4 Uncertain and unbalanced global economy recovery (2) Critical factor: COVID-19 The pandemic situation is still severe; China, Russia, the US and other countries are speeding up vaccine development, which is expected to make a difference. Trend of domestic/overseas newly confirmed cases Domestic Unit: case Overseas Domestic/Overseas newly Overseas cumulative Overseas cured confirmed cases cases/existing cases/deaths confirmed cases Global Economy and China’s Economy in 2021 5 Uncertain and unbalanced global economy recovery (3) According to IMF forecast in October: • World economy would shrink by 4.4% due to COVID-19, 4.3% for the US, 8.3% in Eurozone, and 3.3% for emerging market economies (EMEs), while China was expected to have a 1.9% growth. These forecasts were raised except that for EMEs. • At least 90 countries may come to a financial crisis. • A strong rebound in 2021 was probable (due to a low base). 10.0 （%） 8.0 8.2 8.8 7.2 6.0 6.0 6.2 5.2 5.2 5.2 5.9 5.2 3.9 4.2 3.6 3.9 3.6 5.0 3.1 2.8 2.8 3.5 3.0 3.1 3.1 3.0 2.3 5.5 6.1 1.7 1.3 1.5 2.0 1.5 1.7 1.9 4.9 0.6 0.3 3.7 4.2 1.3 1.1 -0.3 0.3 2.8 1.7 2.2 1.7 2.1 3.2 0.2 0.0 2.2 0.7 1.4 -3.4 -4.1 0.0 -3.0 -1.7 -5.0 -5.3 -3.8-3.3 -4.4 -4.3 -4.6 -4.1 -4.3 -5.8 -6.0-9.8 -5.8 -5.4 -7.1 -10.0 -8.1 -8.0 -8.3 -9.0 -9.8 -10.6 -10.3 -15.0 -12.8 2019 2020 Projections 2021 Projections Global Economy and China’s Economy in 2021 Source: IMF, 2020 6 Uncertain and unbalanced global economy recovery (4) • The world economy growth is expected to shrink by 4.2% this year as a result of COVID-19, better than that projected in June and September. • The global economy may grow by 4% on average over the next two years. The global GDP growth is projected to be at 4.2% in 2021 (down from 5% estimated in September) and 3.7% in 2022. • By the end of 2021, the global economy may recover to pre-COVID-19 levels. The latest forecasts released by OCED in December 5.0% 5.1% 7.6% 8.0% 10.0% 4.0% 2.3% 4.2% 3.2% 3.6% 4.2% 1.8% 5.0% 1.5% 2.8% 0.0% -5.0% -3.7% -4.2% -5.3% -5.5% -10.0% -4.5% -3.8% -7.5% -5.8% -7.9% -10.1% -15.0% -11.2% World US Euro Area Japan UK Germany China Economic growth forecast for 2020（Latest forecast） Economic growth forecast for 2020（Previous forecast） Economic growth forecast for 2021（Latest forecast） Economic growth forecast for 2021（Previous forecast） Note: Previous forecasts for China and Germany not available. Source: OECD Global Economy and China’s Economy in 2021 7 1. Uncertain and unbalanced global economy recovery (5) Relatively optimistic forecasts by Goldman Sachs Real GDP 2019 GS 2020（f） GS 2020（f） GS 2020（f） Growth Percent Consensus Consensus Consensus Change yoy US 2.2 -3.5 -3.9 5.3 3.8 3.8 2.8 Japan 0.7 -5.3 -5.6 3.3 2.5 2.0 1.5 Euro Area 1.3 -7.2 -7.7 5.3 5.2 4.3 2.6 Germany 0.6 -5.8 -5.8 3.7 4.4 4.2 2.7 France 1.5 -9.2 -9.5 7.0 6.6 4.7 2.7 Italy 0.3 -8.7 -9.8 6.0 5.5 3.6 2.6 Spain 2.0 -11.6 -12.0 7.1 6.4 6.4 4.3 UK 1.3 -10.5 -10.0 6.1 5.5 7.3 2.9 China 6.1 2.0 2.0 7.5 8.0 5.7 5.4 India 4.9 -8.9 -9.0 10.0 7.4 7.2 6.9 Russia 1.3 -4.0 -4.0 5.0 3.0 3.0 2.3 Brail 1.1 -4.6 -5.2 4.0 3.5 2.9 2.5 World 3.0 -3.9 -4.0 6.0 5.2 4.6 3.7 Note: All forecasts calculated on calendar year basis. IMF forecasts used for India 2022 consensus when quarters not available in Bloomberg. Source: Bloomberg, Goldman Sachs Global Investment Research Global Economy and China’s Economy in 2021 8 Uncertain and unbalanced global economy recovery (6) Favourable factors: Adverse factors: • Owing much to the implementation of • Many countries are still going through Basic judgements: substantial relief programs, pandemic rebound which will have • Economic recovery is likely to come enterprises or market entities in most negative impact economic recovery. economies have managed to survive. despite its uncertainty; • A number of vulnerable groups, Recovery in investment confidence • Based on existing indicators, there enterprises and countries are still may immediately boost the economic will be a strong rebound in 2021 experiencing uncertainties, and such recovery. (from an optimistic but prudent continuity will expose them to greater perspective, global GDP may shrink • The fiscal relief expenditure will be economic losses. by less than 4%), and the economy increased by at least USD 1 trillion • The economic consequences caused will be back to normal (i.e., pre- after Biden takes office. by the pandemic will exert lasting pandemic level) in 2022; and • The epidemic is likely to be controlled effects in the coming years. • Recovery will be different in rapidly after COVID-19 vaccines are countries/regions, while China will phased into common use. still lead the world in economic • The accelerated recovery of China’s recovery. economy and global efforts on epidemic control will boost market confidence and promote global economic recovery. Global Economy and China’s Economy in 2021 9 Significant risks to global finance in the post COVID-19 world Global Economy and China’s Economy in 2021 International financial risks in the post COVID-19 world (1): Another sharp fall in the stock market Triggers include: • The significant V-shaped rebound in the stock market is in sharp contrast to the recession in the real economy, indicating an obvious bubble in the market. − S&P 500 has increased by more than 60% since March; − Buffett: the bubble is larger than that in 2000. • Factors triggering another sharp fall include: − Economic growth shrinkage resulting from further outbreaks far outstripped expectations. − Trade frictions and geopolitical conflicts are getting more intensive; − The Democratic Party has made a major adjustment to the economic policies after they won the US election; Source：S&P Dow Jones Indices LLC − The market is adjusting itself under the influence of external factors. Global Economy and China’s Economy in 2021 11 International financial risks in the post COVID-19 world (2): A substantial devaluation in USD The extreme monetary and fiscal policies, especially unlimited quantitative easing of the US in response to the impact of the COVID-19 will raise concerns among investors about the medium and long-term prospects for economic growth. • M2 increased by 20%; FED’s balance sheet increased from USD 4 trillion to 7 trillion. • According to the Congressional Budget Office, the deficit of the Federal Government of the United States in 2020, as a proportion of Gross Domestic Product (GDP) may soar to record high of 17.9% during peace period. • In Q1 2020, net national savings fell to 1.4% of national income. This is the lowest record since late 2011, only accounting for a fifth of the average (7%) between 1960 and 2005. • Cyclical inflation and asset bubbles. Global Economy and China’s Economy in 2021 12 International financial risks in the post COVID-19 world (2-1): A substantial devaluation in USD USD Index: 1976-2019 Hit the bottom? Source: macrotrends Global Economy and China’s Economy in 2021 13 International financial risks in the post COVID-19 world (3): Monetary and financial crisis in emerging markets • The centre of the outbreak has shifted to EMEs (GDP growth has been largely revised downward this year); IMF estimated that EMEs would need at least USD 2.5 trillion in 2020 coping with the pandemic.
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